Special Economic Zones: well worth considering

The incentives offered by Special Economic Zones offer substantial benefits for companies and local communities.

As part of its efforts to reposition South Africa in the global economy, government has established Special Economic Zones (SEZs). Companies are granted tax incentives to locate their premises at these purpose-built areas, thereby creating jobs and assisting with regional development.

Benefits include a lower tax rate for corporate permit holders of 15% (as per Section 24(4) of the SEZ Act (2014), special building allowances as tax deductions, and special allowance for both greenfield operations (brand-new concerns) and brownfield operations (expansion of existing concerns). In addition, because the SEZ is in a customs-controlled area, a business will qualify for VAT and customs relief.

So far, SEZs have been established in Koega, East London, Richards Bay, Dube Trade Port – which incorporates a special Agri and Trade Zone – and Saldahna Bay.

The Department of Trade and Industry (DTI) website lists the criteria that must be met for institutions such as public-private partnerships, municipalities and local or provincial government to apply for SEZ consideration. If the SEZs are
indeed sustainable, areas where unemployment has reached endemic proportions would be well advised to enter into public-private partnerships and establish such zones for the benefit of their communities and regions.

Government’s Industrial Policy Action Plan identifies SEZs as nodes for growth and, according to the DTI website, pre- and post-designation funding is available for applicants currently in an Industrial Development Zone or in the process of setting up a SEZ.

In terms of the SEZ policy and Act, non-government participation is encouraged. The tax rate of 15% places SEZ-accredited companies in a position similar to Botswana Investment and Trade Centre companies and Botswana Innovation Hub companies. Namibia has similar incentives.

The SEZ incentives certainly appear attractive, and I hope they don’t get watered down in the same manner as the diesel rebate, which government seems keen on clawing back from farmers.

Business people should consider taking advantage of national incentives such as the SEZs, as well as regional ones. Increased economic activity and employment can only be a good thing.

For more information, visit www.thedti.gov.za